Cord Cutting Accelerating: Will Pay-TV Adjust or Die?

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Cord cutting is accelerating with the pay TV industry losing 566,000 subscribers last quarter alone. With DirecTV alone losing 133,000 subscribers last quarter, MoffettNathanson notes it was the worst second quarter net loss in history for the nation's legacy TV industry. The 566,000 subscriber loss comes on the heels of a 321,000 subscriber net loss the quarter before.

And things are going to get worse, claims Craig Moffett.
The number of pay-TV households is now shrinking at an annual rate of 0.7%, compared with 0.1% a year ago. "That may not seem like a mass exodus," Moffett wrote in a research note, "but it is a big change in a short period of time."

Moffett notes that pay TV penetration rates are falling even faster if you consider the TV market has failed to keep pace with the recovery in the housing market...

There's of course one thing the cable and broadcasting industry could do to cut the Internet revolution off at the pass, but it's the one thing it has historically avoided like the plague: seriously competing on price.

In many ways the pay-TV companies are stuck in the middle. Content providers have been demanding higher and higher fees, including the retransmission fees that broadcasters charge. Sports leagues and college conferences expect increased fees for the rights to their games. It's a vicious cycle. Up until the digital transition, and the advent of practical internet streaming, the cash seemed to be endless, but now the market is finding out what their product are really worth. In many cases it isn't as much as they thought. Expect to hear a lot of whining from both the video distributors and the content creators and owners. Sorry, but there is only so much money to go around.